Summary
Custodia Bank and Vantage Bank have outlined a new mechanism called the Hazel network that lets a token behave like a bank deposit within a banking consortium but convert into a cash-and-Treasury backed stablecoin when transferred to external users. The system has been running on Ethereum since March with participating banks testing the infrastructure. Broader availability to banks and their customers is expected in Q4 2026. The proposal is designed to work alongside existing core banking systems rather than replacing them.
Key Facts
- Hazel network token: deposit within consortium, stablecoin when transferred externally
- Running on Ethereum since March 2026
- Q4 2026 target for broader availability
- Designed to integrate with existing core banking systems
- Addresses bank concern about losing deposits to stablecoin issuers
- The Clearing House also planning tokenized deposit network for H1 2027
- Total stablecoin market cap: ~$315B (DeFiLlama)
Why It Matters
The Hazel proposal represents a concrete attempt to bridge the gap between traditional banking and blockchain settlement without forcing banks to choose between deposits and stablecoins. If successful, it could give community banks and credit unions a path to participate in tokenized payments while keeping deposits on their balance sheets. The Q4 2026 timeline puts it in direct competition with The Clearing House's tokenized deposit network.